OLONGAPO CITY—Local officials have approved a debt-restructuring agreement that they hope could stop the state-run Power Sector Assets and Liabilities Management Corp. (Psalm) from disconnecting the city’s power supply due to its failure to pay over P5 billion in debts.
Vice Mayor Rolen Paulino, the city’s incoming mayor, said the council met on Monday and approved a debt restructuring plan that was different from that signed by outgoing Mayor James Gordon Jr. and Psalm.
City officials said it was up to Psalm to accept or reject the new plan.
Emmanuel Ledesma Jr., Psalm president and chief executive officer, wrote Gordon and the city council on June 18 to inform them that the city government has until June 25 to settle its debts.
The debts include those of the police, public schools and other facilities administered by national government agencies, said Ferdinand
Magrata, city administrator, in an earlier statement.
Gordon said the debt ballooned due to systems losses and interests from the unpaid bills.
But Magrata said the city government is questioning computations by Psalm because the Electric Power Industry Reform Act of 2001 had condoned some of the financial obligations that used to burden local governments.
Gordon had presented a draft restructuring agreement to settle a portion of the debt from the sale of the Public Utility Department (PUD), which used to distribute electricity in the city.
PUD was sold for P610 million to the Olongapo Electricity Distribution Co. Inc. (OEDC), which was given a 25-year franchise to supply power to the city.
Records showed that the council has allocated P500 million from the PUD sale to pay for a portion of the city’s debt to Psalm. At least P50 million has been set aside for retiring PUD workers and another P60 million to pay Olongapo’s debts to the San Miguel Energy Corp.
But Paulino said some provisions of the earlier draft restructuring agreement were too much “because they will tie up the hands, feet and neck of the next administration.”
He said one condition gives PSALM a role in approving the city’s annual budget and requires its permission for loans from other sources. Another condition, Paulino said, allows Psalm to examine the city’s book of accounts.
In a session on Monday, Paulino said the city council approved the release of P20 million a year to Psalm and P2 million a year to San Miguel Energy Corp.
“We’re also asking Psalm to give us time to assess whether this P5-billion debt is real,” he said.